Understanding Home Appraisals: The Top 10 Things You May Not Know

Home appraisals are a crucial part of the real estate process, but many people are unaware of some aspects of the process and need for appraisals or how they affect real estate sales transactions. Here are some key things that people typically don’t know about home appraisals:

1. Appraisals are primarily for the lender’s benefit, not the buyer’s. The main purpose of an appraisal is to help the lender evaluate the collateral for a loan: the property itself. The lender is the appraiser’s client, and there are confidentiality rules in place to protect their communication.
2. Automated appraisals exist! In urban areas with well-established housing values, lenders may use automated systems to determine a home’s value without an in-person visit. 
3. Drive-by appraisals are sometimes used. Although not typical, appraisers may conduct just an exterior assessment of the property without entering the home.
4. Appraisers consider more than just the property itself! They also may consider your neighborhood amenities, the community features, and recent sales of comparable properties nearby.
5. Water damage is a significant concern. Appraisers look for signs of water damage as it can indicate potential mold issues, which can impact a home’s value and longevity.
6. Building materials matter. The materials used in construction and the overall condition and quality of the property are important factors in the appraisal process. Building materials can vary in quality and ultimately affect the value.
7. Financial records are part of the assessment. For properties like condos or co-operative property, appraisers may review the building’s financials and maintenance records.
8. Appraisals can affect mortgage approval. If an appraisal comes in lower than expected, it can delay or even derail a home purchase.
9. Buyers typically pay for the appraisal, even though they don’t choose the appraiser. The lender orders the appraisal, but the cost is usually passed on to the buyer.
10. Appraisals differ from home inspections. While both involve evaluating the property, appraisals focus on determining the home’s value, whereas inspections look for potential issues or needed repairs, and typically benefit the buyer as they prepare for future upkeep for the property.

Understanding these lesser-known aspects of home appraisals is not only informative, but may start a line of thinking or a conversation that helps you learn more about the appraisal process and how it is helpful in your unique situation. 

Questions about the unique aspects of home appraisals? Contact us!